ONS: Potential increase in older generation renting privately
The ONS has published its latest findings on changes in their “Living longer: changes in housing tenure over time” report.
Almost three quarters of people aged 65 and over owned their home outright in 2017.
The report examines changes in housing tenure between 1993 and 2017 and what those changes might mean for older people in the future.
Younger people are less likely to own their own home in the past and more likely to be renting, with half of people in their mid-30s to mid-40s having a mortgage in 2017 compared with two thirds 20 years earlier.
A third of this age group were renting from a private landlord in 2017, compared with fewer than 1 in 10 in 1997.
The ONS suggest that if this trend persists into their older ages, in the future older people will be more likely to be living in the private rental sector than today.
This research follows the English Housing Survey which shows that home ownership among the older population has increased in recent years, with a higher proportion paying off their mortgages by the age of 65.
The three quarters of those aged 65 and over who owned their homes outright in 2017 includes those who benefited from the Right to Buy scheme.
Increases in the private rental sector have been seen for all age groups apart from the very oldest, with the increase particularly pronounced in mid-life, according to the report.
Looking towards the future, the report states that the traditional mortgage length is 25 years and although mortgage lenders are today more likely to loan to people at older ages than previously, even with increases in retirement age, people are still likely to need to take out a mortgage by their 50s in order to own outright in retirement.
Those in mid-life are far less likely to have a mortgage than in the past and far more likely to be renting privately.
While only 6% of people aged 65 years and over rent privately today, the ONS suggest that this is likely to increase in the future if people who are currently in their 30s, 40s and 50s in the private rental sector remain so into older ages.
The potential benefits of an increase in the older population in the private rental sector include maintenance responsibilities and costs falling on the landlord rather than the resident.
The report suggests that this is something that may be particularly beneficial in later life as “reduced income, deteriorating health and decreased cognitive function may impair the ability of people to maintain their homes”.
Renting privately may also mean that older people are more likely to be able to move to a different, better-suited property if their needs change, as they would not need to rely on the sale of their house.
However the private rental sector is the most expensive tenure in terms of housing costs.
While those with mortgages also often have high housing costs, repayments stop when the mortgage is paid off, usually prior to retirement.
A market rent that is affordable to someone of working age may cease to be affordable after retirement, when income decreases.
Additionally, while responsibilities for repairs do not fall on tenants, private landlords may not always meet obligations to maintain the property satisfactorily.
Jim Boyd, chief executive of the Equity Release Council, said: “The UK is ageing rapidly and few can be surprised that (74%) of people aged 65 and over own their own homes.
“For those facing a shortfall in retirement income, debt or care costs this provides them with a lifeline as they try and make sense of the financial choices open to them.
“This is another wake-up call for politicians and regulators that property wealth must be included in all financial services conversations with the necessary prompts, guidance and advice how to include this important asset to meet their financial needs alongside pensions savings and other assets.
“Over the past decade a combination of an ageing population and home ownership among people in later life has resulted in the equity release market evolving into a mainstream financial services product, with tens of thousands of customers now using increasingly flexible products backed by robust safeguards to make future financial plans.
“It is critical that anyone considering these products get qualified and regulated financial advice and seeks the safeguards offered by members of the Equity Release Council.”
Chris Knight, chief executive officer at Legal & General Retail Retirement, added: “These figures have interesting implications for the lifestyles of tomorrow’s retired people.
“While most of the UK’s current over 65s are owner occupiers, the ONS has indicated that a larger proportion of people of retirement age will be in the private rental sector in the future; this is due to the changing trends in homeownership of people currently in their 30s and 40s.
“However, these forecast statistics seem to be only an extrapolation, comparing the actions of the current generation with the previous generation.
“It’s also very possible that tomorrow’s retired people will adapt in different ways, such as entering the housing ladder in later life and borrowing into retirement.
“Whether it be preparing to rent later in life or maintaining mortgage payments into retirement, the one thing that these figures make clear is that younger people will need a sufficient retirement income in place so that you can both meet these costs and also pursue the other ambitions they have for their later years.
“At Legal & General Retail Retirement, our mission is to improve the lives of people in retirement and build a better society for the future; part of that is by anticipating how people’s needs are likely to shift over time.”
The implications of living in the private rental sector in later life will be investigated in more detail in a future article by the ONS, which will be published in spring 2020.